3. The capital portfolio for a firm consists of 28% debt and 72% equity. One-fourth of the debt capital is the result of loans having an interest rate of 4.2% per year compounded quarterly; the remainder of the debt capital is the result of $1,000, 20-year 6.0% quarterly bonds at a selling price of $997.50, after commissions. The firm uses a 7% equity market risk premium in calculating its WACC; the 30-year risk-free rate is 3.1%; the firm has a beta of 0.95; and its corporate income tax rate is 25%. What is the after-tax weighted average cost of capital for the firm? Give your answer as a percentage to 2 decimal places.

3. The capital portfolio for a firm consists of 28% debt and 72% equity. One-fourth of the debt capital is the result of loans having an interest rate of 4.2% per year compounded quarterly; the remainder of the debt capital is the result of $1,000, 20-year 6.0% quarterly bonds at a selling price of $997.50, after commissions. The firm uses a 7% equity market risk premium in calculating its WACC; the 30-year risk-free rate is 3.1%; the firm has a beta of 0.95; and its corporate income tax rate is 25%. What is the after-tax weighted average cost of capital for the firm? Give your answer as a percentage to 2 decimal places.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Please answer this MCQ
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